Analysis

The Sierra Leone Mining sector: Past and Present

11 May 2009 at 06:42 | 1409 views

By Engineer Pierre Lightfoot-Boston, USA.

Previous leaders have not only done a dismal job with the Sierra Leone mining sector, but betrayed the trust of the Sierra Leone populace that supported and voted them in office and subjecting the good people of Sierra Leone into abject poverty. The Sierra Leone mining sector can be tied to many of the systematic problems currently plaguing the nation, which include, but are not limited to the following; lackluster leadership, lack of vision, no proper planning, little or no execution of existing policies, poor work ethics, misplaced priorities and a populace that has failed to demand changes.

The Sierra Leone mining sector if properly managed could not only provide the government with much needed revenue, but will also have a positive generational effect on the people of Sierra Leone. On the other hand if the Sierra Leone mining sector continues to be in a dismal state, it will not only have a negative generational effect on Sierra Leone, but it will also have an apocalyptic effect on mining communities, specifically we will witness rise in ethnic tension, clashes between ruling houses and their subjects, withering away of these communities, rise of militias, disadvantaged youths turning to drugs and crime etc. Despite, these dreadful possibilities, we can reverse this situation, but it is imperative that we act now, by taking a comprehensive and aggressive approach in solving this impending disaster. In the previous two pieces of this three piece article I have examined the different dynamics at play within the Sierra Leone Mining sector. The third piece also further examine the different dynamics at play and also present a solution for the Sierra Leone mining Sector to be an efficient and effective mining sector that will result in high returns and prosperity for all Sierra Leoneans. There has been a lot of discussion among Sierra Leoneans about the mining sector in Sierra Leone, but it should be pointed out that in most cases these discussions are dominated by the diamond trade, and the corruption between politicians and stakeholders in the industry. Unfortunately a lot people tend to ignore the fact that the Sierra Leone mining sector is made up of both precious and non-precious minerals. In all fairness, its understandable why Sierra Leoneans focus their discussions on the diamond sector, it is a fact that the diamond sector single handedly funded not only the worst bloody conflict in our country, but also one of the worst internal conflict the African continent has witnessed. At this point, it will be informative for us to take a retrospective look at how it all began.

History of Diamond Sector

A colonial Geological Survey team, led by J. D. Pollet, discovered diamonds in the Gbogbora Stream in the Nimikoro Chiefdom of Kono District in 1930, it changed the course of Sierra Leone’s history forever. Commercial exploitation of the gems began in the early 1930s. Soon after, full-scale prospecting was taken over by the Consolidated African Selection Trust (CAST), at the time one of the biggest mining conglomerates in the world. CAST later formed a subsidiary company, Sierra Leone Selection Trust (SLST), which was given a monopoly in 1935 “to prospect for, produce, and market all Sierra Leone diamonds.” In an attempt to stop widespread illicit mining and smuggling, the government changed this arrangement in 1955, and the company’s operations were confined to an area of 310 square miles in Kono and Kenema Districts. SLST was given 1,570,000 in compensation. The government then initiated an Alluvial Diamond Mining Scheme, issuing miners’ and dealers’ licenses to individuals and small companies. In 1956, the government entrusted the Diamond Corporation of Sierra Leone (DCSL), a subsidiary of De Beers, with diamond marketing rights. Illicit mining and smuggling, however, continued. Because the DCSL included a 10-12 per cent margin on the price of diamonds (thus reducing the price paid to diggers), the gems could fetch better prices outside of Sierra Leone. Liberia thus became a ready conduit for Sierra Leone’s smuggled diamonds. As much as 55 per cent of the gems were smuggled out

each year during the late 1950s. This problem, partially contained through security operations in the 1960s, grew again after President Siaka Stevens effectively nationalized the lucrative SLST mines in 1970.. Diamond production peaked in the 1960s,with Sierra Leone officially exporting 1.7 million carats per annum by the end of the decade. Another 300,000 carats probably left the country illegally. For much of the 1960s and 1970s, diamonds accounted for approximately 70 per cent of Sierra Leone’s foreign exchange earnings. High-level official corruption and the collapse of much of the state’s infrastructure, however, compounded the age-old problem of smuggling, and by 1985, Sierra Leone was officially exporting a paltry 50,000 carats a year. When closely examined it is obvious that the Sierra Leone Diamond Sector went in a state of free fall immediately after Siaka Stevens took leadership of the executive branch of government

The Sierra Leone mining Sector operates under the Ministry of Mineral Resources, given the critical role of the ministry in the running of the mining sector. It makes a lot of sense for us to take a closer look at the Ministry of Mineral Resources.

Ministry of Mineral Resources

The Ministry of Mineral Resources occupies offices in the fifth floor of the Youyi Building at Syke Street, Freetown, Sierra Leone. The ministry is headed by Alhaji Alpha Kanu, relatively recent appointment, he succeeded Alhaji Abu Bakarr Jalloh, who was relieved of his cabinet position after a cabinet reshuffle, upon reviewing his tenure in office, it can be concluded that he was not only a total failure, but further enabled the disintegration of Sierra Leone through his inept performance at the ministry. On the other hand the performance of the new appointment Alhaji Alpha Kanu remains to be seen, but also it is imperative to point out that after more than a month in office there has been no unveiling of a plan or vision as to how to transform the mining sector to an efficient and effective Industry. The Ministry of Mineral Resources is responsible for administering the mines and mineral Act. It consist of three department; (i) An administrative division that deals with human and financial resources, equipment and other general administrative matters, this department is headed by the Permanent Secretary John Quee. The other two departments are supposedly technical departments, (ii) Mines division, which responsibility is to administer the provisions of the mines and minerals Act, the Explosive Act and the regulations made under these Act. These include the issue of all mineral rights and the administration and supervision of all activities under these rights. This Division also issues Mining Licences to Artisanal and small-Scale miners, and administers the regulations on the mining and marketing of precious minerals through the Government Gold and Diamond Office (GGDO) produced under these licences, this department is headed by the Director of Mines. (iii) Geological Services Division, which is based in its entirety in Freetown, and not regionally represented, thereby providing a sub- standard service. The GSD is suppose to undertake the geological mapping of Sierra Leone, prospecting and exploration operations, the collection, compilation, publication and dissemination of data and information concerning the geology and mineral resources of the country. The Geological Survey also advises Government on all matters of geological nature.

The ministry, however, like many others after years of war, had been badly weakened, very corrupt, viewed by many government officials as a get rich quick ministry, which over the years has attracted the disdain of foreign donor agencies, which all too quickly accuse it of corruption. Like most ministries, its two main problems is excessive corruption and lack of capacity. In the past donor agencies have tend to favor investments in reports rather than in capacity building and eliminating corruption.

The lack of resources and personnel has resulted in the GSD doing very little geological work and thereby making it a useless department. Whereas, the mines division has not only been handicapped by lack of qualified personnel, but also its lack of sense of purpose has resulted in another useless department within the ministry. It is very sad and unhelpful to Sierra Leoneans who hope to benefit from the mining sector, because critical departments within the ministry which should ensure that these hopes become a reality are clueless about their functions. For instance, the GSD is suppose to advise government and the ministry on all geological matters, in addition to compiling, publishing and disseminating data and information concerning mineral resources. As a result of these many deficiencies within the ministry, the ministry has no option but to be a service based ministry issuing permits, instead of been a technical ministry. If one closely examines the root causes of the failure of the ministry it could be traced to the fact that we had a whole generation of leaders that have failed to design a plan or vision for the Sierra Leone mining Sector. On the other hand, Sierra Leoneans have a lot of questions for their Executive, but one of the questions that is very important to all Sierra Leoneans is What will be done by the Ernest Koroma Government to transform the Sierra Leone Mining Industry? If any, it remains to be seen. I believe that we will not necessary see a change of direction, but we will witness a change of pace, a pace characterized by retrogression.

Ordinary Sierra Leoneans: The biggest Losers ?

Since the inception of the Sierra Leone mining sector, there has been a lot of wealth creation, but this has only benefited very few people, namely corrupt politicians and government officials , close family and friends of corrupt politicians and friends. The Sierra Leone government has foregone millions of revenue through secret deals and unpatriotic mining subsidies for bribes to line their pockets and finance their unrealistic and senseless lifestyle---mistresses and lavish spending. For instance, the Sierra Rutile will only start declaring taxable income in 2014, a full 10 years after re-starting operations in 2004.

It is imperative to point out that Sierra Rutile, the second largest mineral exporter in Sierra Leone, has acquired extraordinary tax exemptions through three agreements signed with the government. In 2001, the government and Sierra Rutile signed an agreement which was enacted in parliament in 2004. The Sierra Rutile Agreement Act of 2002 sets royalty rates at 3.5% of turnover, or 37.5% of profits depending on whichever is higher. The law also contains a stability clause, which allows, Sierra Rutile to continue paying the taxes specified in the Act for the duration of the mining lease, which is 25 years. Then in July 2003, the government signed a memorandum of understanding with Sierra Rutile, which overturned some of the provisions of the Act. First, it reduced the royalty rate to a miniscule 0.5% until 2014 and scrapped entirely the payment of corporate income tax on profits until 2014. It further reduced the fuel import duty from 12% stipulated in the law to 1% until 2014. It is interesting that an internal Sierra Leone government review estimates that revenue losses from the tax concessions granted to Sierra Rurile would amount to US $ 98m between 2004 and 2016 or around US $8m a year Other estimates using recent company revenue projections put the losses at US $68m a year. Sierra Leone is the poorest country in the world ---this additional income would have enabled the government to plan for greater expenditure on health, education and infrastructure services that would have benefited the people of Sierra Leone who continue to live in abject poverty.

Also it should be underscored that all these agreements were made during the Ahmed Tejan Kabbah government, these agreements which result to huge losses to the people of Sierra Leone is a treason in every sense of the word, Ahmed tejan Kabbah and all those responsible should face the death penalty, very simple and clear. On the other hand Koidu holdings the country largest diamond mine processing kimberlite ore, started mining operations in 2004. By 2007 it was exporting US$ 28.2m worth of diamonds. During this time it has remitted a total of US $ 9.97 m to the government in royalties and fees, not corporate income tax. According to the company’s own financial forecasting it will only start declaring taxable income in 2011.

Real Hope or False Hope ?

In early 2008, President Ernest Koroma appointed a task Force to review three individual contracts signed with companies mining rutile, diamonds and bauxite. As a result a cumulative committee has now been established to review all mining-related laws and asses all current mining contracts, and in particular the 2003 MOU with Sierra Rutile which overturned the 2002 Sierra rutile Law. However there has been no findings released by the Koroma government, which sends a message that this matter is not been treated with the urgency it deserves to be treated with. The Koroma government should understand that failing to review these agreements and making necessary changes is not only the morally right thing to do but also it is in the country best interest and failing to do so makes him just as guilty as Ex-President Ahmed Tejan Kabbah who was in compliance with these agreements.

In conclusion, I will provide recommendations to the Sierra Leone government that will help them in transforming the Sierra Leone Mining sector, this recommendations are part of a comprehensive plan that I have prepared based on my expertise as a Mining Engineer, a plan that will address all the deficiencies within the Sierra Leone Mining Sector. The plan is titled the Sir Henry Lightfoot Boston Plan, it is name in the memory of my grandfather, who dedicated his life to public service in Sierra Leone.

Some Recommendations form the Sir Henry Lightfoot-Boston Plan

Collaborate with the Legislature, Executive, Industry and Mining Engineering Schools to set up a Mining Engineering School in Sierra Leone
Collaborate with local academic institutions and foreign institutions to help provide indigenous mining companies with the technological know-how and skills that will ultimately transform indigenous mining companies from small scale artisanal mining operations to large scale mining companies
Collaborate with qualified Sierra Leoneans and international partners to develop a comprehensive national seismic database-that will provide the government with in-depth knowledge of the different types of minerals within the country, its location and quantity
Review of mineral agreements---This is important to ensure optimum benefit of the exploitation of mineral resources, because
Some companies have been allowed to hoard mineral rights without developing them as required.
ii Some companies have received mining rights without going through the requisite environmental permitting requirements

Collaborate with the relevant authorities to develop government institutional capacity. ( It is clear that after years of conflict and political interference, limited resources have significantly eroded the capacity of the Ministry of Mineral Resources)
Develop the capacity of Mines division to drive balanced development of the sector, including administering and developing the national seismic database; promoting investment opportunities; and overseeing industry compliance with mineral laws/ codes.

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